ESG at GS: Combating Climate Change
This article is part of our ESG at GS series for the Careers blog where we highlight a theme from our Environmental, Social and Governance Report and hear from some of our people who do ESG-related work at Goldman Sachs.
Kevin Smith is a vice president in the Goldman Sachs Environmental Markets Group. He and his colleagues work in close collaboration with the firm’s businesses to further opportunities in sustainable finance and clean energy. The Environmental Markets Group drives the firm’s thought leadership and catalyzes innovative market solutions to address environmental and social challenges. Among the team’s responsibilities is the goal to advance the firm’s progress on deploying $150 billion of financing and investment toward clean energy by 2025.
We sat down with Kevin to discuss how the firm is working toward its ambitious clean energy goals and how his team is leading its work on environmental stewardship.
Q: What is Goldman Sachs doing to help unlock the potential of clean energy?
Kevin Smith: Our strategy is to focus on our core competencies as a firm: we provide advice and capital to companies who are leading the clean energy transition. We will also partner with and invest alongside our clients to further market growth in this space. We have ambitious goals – to deploy $150 billion by 2025 – and, since we started tracking in 2012, we’ve helped deploy more than $71 billion (as of December 2017) into this space. By helping scale up clean energy markets, we are supporting long term sustainable economic growth and the transition to a low carbon economy.
Q: Your team helps review potential transactions to evaluate environmental and social risks, and to identify opportunities to manage them. Can you tell us more about this?
KS: As a global financial institution we serve clients across all industries, so we have to be very mindful of the potential impact, both positive and negative, that we could have on the environment and society. Because of this, we approach the management of environmental and social (E&S) risks with the same care and discipline as any other business risk. We undertake detailed reviews to consider the E&S impacts and practices of our clients and potential clients in our business selection decisions. To give you a sense of the scale, in 2017, our team reviewed more than 1,000 deals in a variety of sectors, including Oil and Gas, Power Generation and Metals and Mining, among others.
Q. Goldman Sachs has a goal of sourcing all of its global electricity needs from renewable energy by the year 2020. What is the progress in this area?
KS: In late 2015, we released an updated Environmental Policy Framework that established an even more ambitious road map across each of our businesses to harness market solutions to address critical environmental issues. We challenged ourselves to reduce our operational footprint and to do so in a way that would help catalyze the market for clean energy beyond our traditional investment and financing activities. As part of that, we established a target to source 100% of our global electricity consumption through renewables by 2020.
In terms of progress, last year we procured more than 95% of our global electricity needs from renewable sources, and we’re on track to hit our 2020 goal. We also advanced our efforts by serving as a creditworthy off-taker of a power purchase agreement with NextEra Energy Resources. This will facilitate a new 68MW wind project which will also create 150 construction jobs in the process.
Q. How does the firm play a role in raising awareness of critical environmental issues?
KS: Goldman Sachs has an important role to play in addressing critical environmental issues. Through our business activities and our own operations, we have the opportunity to engage with a wide range of stakeholders including our clients, investors, policymakers, NGOs and think tanks and the media, particularly in areas where we have market and technical expertise. We also host conferences and convene discussions on ESG issues. For example, in November 2017 we hosted our Sustainable Finance Innovation Forum, which convened some 350 corporates, investors, public sector representatives and non-profit organizations to discuss key themes shaping markets and sustainability. The Forum was held with the backdrop of shifting U.S. policy, including the pull back from the Paris Climate Agreement, juxtaposed with strengthening market drivers. In addition to our external client events, we feature environmental leaders through Talks at GS and annually host a series of internal events in April to coincide with Earth Day.